Name - Rahul Gupta
Roll No. - 0924068
Course – B.Com(P)
PERSONAL BUDGET
A personal budget is a monetary strategy that assists you in monitor your earnings, expenditures,
reserves, and expenditure habits over a specific period — usually monthly. It gives you control over
your money and helps ensure you’re expenditure within your means, saving for future objectives,
and preventing unnecessary debt. Having a budget can help people feel more in control of their
finances and make it easier for them to not overspend and to save money.
Benefits of a Personal Budget
🔹 Controls Overexpenditure
Helps you prevent impulse purchases by setting clear expenditure limits. This lowers monetary stress
and keeps your expenditure aligned with your earnings.
🔹 Builds Savings
Ensures that a portion of your earnings is consistently directed toward important monetary
objectives such as buying a home, purchasing a car, going on a vacation, or building an emergency
fund.
🔹 Helps with Debt Management
Allows you to strategy and allocate funds regularly for repaying loans and credit card balances,
preventing debt from piling up.
🔹 Brings Financial Clarity
Gives you a transparent view of where your money goes each month. This awareness assists you in
make smarter, more informed monetary decisions.
🔹 Reduces Anxiety
When you have a structured strategy in place, your finances become more predictable and
manageable, reducing stress and boosting your confidence in money matters.
Steps to Create a Personal Budget
Step 1: Calculate Your Net Monthly Income
Add up all sources of earnings: salary, freelance work, side businesses, passive earnings, etc.
Use your net earnings (after taxes and deductions), not your gross earnings.
This is the foundation of your budget — everything else depends on it.
Step 2: Track Your Expenses
Keep a record of everything you spend for at least one full month.
Use tools like:
o A spreadsheet
o A budgeting app (e.g., Mint, GoodBudget)
o A simple notebook
Tracking helps identify unnecessary or hidden expenditures you might otherwise overlook.
Step 3: Categorize Your Spending
Divide your expenditures into two categories:
o Fixed expenditures: Rent, EMIs, insurance, internet
o Variable expenditures: Groceries, transport, dining, entertainment
This step reveals patterns and highlights areas where you can potentially cut costs.
Step 4: Set Financial Goals
Set clear, time-bound objectives that will motivate you to stay on monitor:
Short-Term Goals (0–1 year):
o Build an emergency fund
o Pay off credit card debt
Mid-Term Goals (1–5 years):
o Save for a car
o Plan a vacation
Long-Term Goals (5+ years):
o Buy a house
o Retirement strategyning
Step 5: Allocate Funds Using the 50/30/20 Rule (Optional but helpful)
A popular budgeting method that divides your earnings into simple categories:
50% for Needs: Rent, food, transport, utilities, essentials
30% for Wants: Dining out, shopping, hobbies, entertainment
20% for Savings & Debt Repayment: Investments, EMIs, emergency fund
Adjust percentages to fit your personal situation if needed.
Step 6: Make Adjustments
Identify and reduce unnecessary expenditures (e.g., unused subscriptions, excessive dining
out).
Look for opportunities to increase your earnings through side gigs, freelance work, or selling
unused items.
Reallocate extra funds toward debt repayment or reserves to reach your objectives faster.
Step 7: Review Monthly
At the end of each month, compare your actual expenditure to your budget.
Analyze where you did well and where you overspent.
Make adjustments for the next month based on your monetary changes and upcoming
priorities.
